Friday, 11 October 2013

The Short Version of the "Austrian" True Money Supply (TMS), as of 30 September 2013

The short version of the Austrian True Money Supply increased by 0.70% (44.02% annualised) during the most recent week ending 30 September to hit USD 9.5842 trillion calculated based on monetary statistics just released by FRED

Following the increase last week, the 1-year growth rate in the money supply again declined, this time to 8.08%. Not including the 8.02% 1-year growth rate from two weeks ago, the current growth rate was the lowest since 8 December 2008. As the chart below shows, the growth rate has been heading downwards for most of this year. 


As I've been pointing out for a few weeks now, the 39 week annualised growth rate has been plunging since April. Although it improved somewhat during the last week, increasing from 4.20% to 4.28%, the last time it was around this level was the week Lehman went under (week ending 15 September 2008). Combined with the U.S. stock market trading at a rich multiple and an earnings yield 28.43% lower than the average since 1978, it's not without reason I wrote the following in the latest 10-year Average Earnings- and Dividend Yields, S&P 500 issued on 7 October,
My point here is that this has been a fabulous year for US equities by most standards leaving the overall stock market, including the S&P 500 index, with less up-side potential.
In addition, some key indicators I follow on a regular basis have hit new peaks lately:
As the table below shows, most of the current growth rates in money supply are lower than they were both 26 weeks and 1 year ago. This highlights that the growth rates have been slowing down which could very well be bad news for the stock market. The decline in the growth rate of the money supply is partly driven by dismal growth in Bank Credit as I have written about in the bi-weekly U.S. Money, Credit & Treasuries Review (here's the most recent issue).